The Peer-to-Peer (P2P) or customer-to-customer business model has been introduced to different industries in recent years, connecting individuals directly without intermediation by a third-party. Leading P2P platforms include Airbnb, Uber and Alibaba. This ongoing trend finally comes to the diamond industry. The Hong Kong Accredited Diamond Exchange (HKADE) which is claimed as the first P2P diamond trading platform in Hong Kong was launched in August 2016, with the vision to be a game changer in the diamond trading industry, empowering individuals and businesses to trade diamonds securely around the world.
An independent and free marketplace
Industry heavyweight De Beers said in its Diamond Insight Report 2016 that digital technology trends, changes in consumer behaviour and new operating models have made fundamental impacts on the diamond industry. Among the striking results is the application of e-commerce in the industry from wholesale to retail, along with a massive amount of online stores appearing in the market like mushrooms after rain.
As far as the practice of online stores is concerned, Cherry Leong, co-founder of HKADE has a broader vision. She told Hong Kong Jewellery: “It wouldn’t have changed the game if we had opened just another online store which is the online version of brick-and-mortar shops. In fact, we are an independent and free marketplace implementing a new P2P business and operation model which eliminates intermediation and unnecessary costs for both diamond sellers and buyers.” HKADE acts as an escrow and verification unit between buyers and sellers, ensuring safe, smooth transactions, which is an innovative way to trade in diamonds as liquid assets online.
Compared with online stores, HKADE is free from influence and control imposed on pricing from large diamond suppliers, as prices of diamonds listed on the platform are set by sellers according to the market demand-supply relationship. For small- and medium-sized diamond wholesalers and manufacturers, HKADE is more like a new sales channel rather than an ordinary platform. It helps them connect instantly with global buyers 24/7 with no intermediation, ensure profit margins, and reduce costs of logistics, insurance and manpower, while not relying too much on seasonal trade fairs.
According to Leong, sellers such as individuals, suppliers, and manufacturers can list their diamonds on the platform and send the diamonds to HKADE when someone buys it. Or, they can send over diamond first, HKADE will upload a 360-degree video of the diamond on the platform for potential buyers’ better viewing. Only white diamonds of 0.5 carat or above which are certified by Gemological Institute of America (GIA) or American Gem Society (AGS) Laboratories can be listed on HKADE. They also plan to accept certificates issued by HRD Antwerp in the future.
Build diamond resale channel
Leong used to help a supplier friend sell diamonds. At that time, some clients expressed their need of reselling diamonds, whereas there was no specialised diamond resale channel to feed this demand. She wanted to fill this market gap and thus decided to establish HKADE. “People always say that diamond is a store of value. However, there is no resale channel to fulfil this value,” she said.
Prior to building the platform, she had visited some large local jewellery stores and pawnshops asking for a diamond ring’s resale price which was worth HK$20,000. The result was that if the ring had been bought within a year, retail shops offered HK$16,000-18,000, while if more than a year, the price was HK$7,000. The price pawnshops gave was lower, around HK$5,000.
“There is a huge gap between a diamond’s retail price and the resale price. This is because information about the diamond market is not always clear. But if we directly connect buyers and sellers through the internet, this price gap can be greatly reduced,” said Shih Wing Ching, director of HKADE and also a renowned Hong Kong serial entrepreneur.
Lowball offers have been commonly seen at the diamond resale market, which will hurt consumers’ perceptions of diamonds and ultimately, the potential diamond demand. In order to protect clients’ interests and safeguard the diamond value, HKADE provides professional knowledge and tools, including the third-party pricing data and price index, offering users insights on global market price trends and helping them set reasonable prices. Its unique Secure Storage service with full insurance coverage and Safe Keeping Receipts (SKRs) also make diamond trading as quick and seamless as precious metals trading. SKRs contain details of every diamond HKADE stores, and can be used as online verification of ownership for bank-related purposes, which means clients can quickly and easily trade diamonds without physical settlement.
The establishment of the diamond resale channel will stimulate diamond trading and boost up the whole diamond and diamond jewellery demand, said Cherry Leong. In the long run, she thinks that diamonds, no matter first-hand or second-hand, should be traded smoothly based on their real value, just like other precious commodities.
“From my experience in the real estate business, a second-hand market contributes to the primary market. At present, the value of diamonds as investments has not been fully realised. When the resale market becomes well established, the investment value, resale value and earnings potential will increase. In turn, market demand for diamonds will go up,” said Shih Wing Ching.
Sustain consumer confidence
The rapid development of synthetic diamond technology and the undisclosed mix of synthetics with natural diamonds have brought about market concerns, threatening consumer confidence in diamonds. In addition to trading only certified diamonds, HKADE has also established the Hong Kong Accredited Diamond Laboratory (HKADL), offering identification service. Equipped with industry-recognised and advanced identification devices and well-trained gemmologists, HKADL ensures that every diamond listed on the platform or purchased by buyers matches its respective certificate.
Leong explained that on the basis of the verification conducted by authoritative identification and grading labs in the industry, they double check and cross check every diamond using a range of testing instrumentations in order to reduce the error rate substantially. “In many cases, certificates cannot absolutely guarantee the authenticity of diamonds, as firstly the diamond may not match the certificate, and secondly attrition may influence a diamond’s clarity grade. Therefore, certificates of resale diamonds need to be renewed for sale,” she stressed. (Photo courtesy: HKADE)
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